peloton shares fall as regulators probing the company over its death trap treadmill profits fall and the firm slashes the cost of its bicycles
Peloton shares fell 8 percent after the company was subpoenaed by the Justice Department and the Department of Homeland Security for information related to its reporting of injuries associated with its equipment.
The company also said Friday that the Securities and Exchange Commission is 'investigating our public disclosures concerning these matters.'
Peloton shares were down nearly 8 percent Friday, following a disappointing fiscal fourth-quarter financial report.
The company said in a filing that they expect revenue to fall 14.6 percent in the 3rd quarter of 2021.
They also announced Thursday that they're cutting the price of the Peloton Bike - the product that was the cornerstone of its popularity - to $1,495 from $1,895.
Peloton shares fell 8 percent after the company was subpoenaed by the Justice Department and the Department of Homeland Security for information related to its reporting of injuries associated with its equipment
The disclosures in an SEC filing arrive a day after the company posted a loss for its most-recent quarter, showed slower revenue growth, and cut the price of its most-popular product. A portion of the latest quarter´s loss stemmed from the recall of its treadmill machine.
In May, Peloton recalled about 125,000 of its treadmills less than a month after denying they were dangerous despite the death of at least one child and injuries to 29 users.
The U.S. Consumer Product Safety Commission warned on April 17 that people with children and pets should immediately stop using the Tread+
Customers are now able use a four digit code to unlock the $4,295 Tread+. The machines will also lock after 45 seconds not being used. Users were asked to update their software the next time they next log, the company said.
Peloton shares were down nearly 8 percent Friday, following a disappointing fiscal fourth-quarter financial report
In a post on its site Peloton describes the new 'Tread Lock' feature as 'safety feature that automatically locks the Peloton Tread+ after you put your Tread+ to sleep or after 45 seconds of inactivity outside of a class'.
Peloton CEO John Foley admitted in May that it was a mistake not to recall their treadmills sooner.
He said: 'We did make a mistake by not engaging earlier in the process. most important thing is the safety of our members'.
Explaining the potential design flaws of the Tread+, the US Consumer Product Safety Commission highlighted the individual rubberized slats which make up its running surface, rather than the single rubber running band found on most rivals.
The Tread+ also sits higher off the ground than other treadmills, and lacks a rear guard. That makes it easier for people, pets or objects to get sucked underneath it and stuck there.
The machine was linked to the death of one child and the injuries of 70 others, including a different youngster who was sucked under one but survived.
That prompted the the Consumer Product Safety Commission to issue a safety warning about the machines in April but Peloton refused to recall them.
It finally agreed earlier this month.
One runner had described the moment her Peloton treadmill threw her into wall and ripped off her skin after she lost her footing.
One woman she fell facedown on the Tread+ May 2019, becoming trapped between a wall and the machine and leaving her with burns and bone fractures.
A father, Brandon Ratliffe, had told Good Morning America that his six-year-old daughter suffered severe abrasions to her legs after she was sucked under the family's Tread+.
A father, Brandon Ratliffe, had told Good Morning America that his six-year-old daughter suffered severe abrasions to her legs after she was sucked under the family's Tread+
He shared photos of his daughter, Jocelyn, that showed bruising and severe scrapes on her legs. Jocelyn was dragged under the device feet-first, her dad said.
And one former employee told Insider: 'There's some stuff that I've had to troubleshoot for members personally, which led me to believe that this thing should not be used by anyone at all.'
The company had said that there's no reason to stop using the treadmill as long as children and pets are kept away from it at all times, it is turned off when not in use, and a safety key is removed.
One runner had described the moment her Peloton treadmill threw her into wall and ripped off her skin after she lost her footing
But the safety commission said that in at least one episode, a child was pulled under the treadmill while a parent was running on it, suggesting it can be dangerous to children even while a parent is present.
The company, best known for its stationary bikes, has seen its sales explode during the pandemic as virus-wary people have avoided gyms and worked out at home.
Treadmills account for around 12 per cent of Peloton's revenue, with the bulk of their cash coming from its stationary bikes, and subscriptions to online exercise classes.
The company estimates about 10 per cent of the recalled treadmills will be returned between now and the end of June, but said others may be returned later since people have until November of next year to get a full refund.
A three-year-old boy suffered horrific third-degree burns after getting trapped underneath a 'defective and dangerous' Tread+.
Sarah and Ygal Saadoun, of Brooklyn, New York, filed a lawsuit against Peloton in July in New York State Supreme Court regarding the severe injuries their son suffered.
They claim their son was sucked under the Peloton Tread+, which retails for more than $4,200, at their home in July last year.
A three-year-old boy suffered horrific third-degree burns after getting trapped underneath a 'defective and dangerous' Tread+
The boy became trapped under the treadmill's 'rotating belt' and it continued to run while he was underneath it, the lawsuit says.
He suffered third degree burns to his back and sides as a result of the incident.
The little boy has been left with permanent scarring and disfigurement, as well as 'shock, emotional distress, pain and suffering', according to the lawsuit.
The Saadouns argue that Peloton knew, or should have known, that the treadmill was 'extremely and unreasonably dangerous'.